[New York Stock Exchange] AI Bubble Concerns and Powell's "Stocks Overvalued" Remarks Drive Broad Decline... Nasdaq Down 0.95%

Concerns of a Bubble Amid Nvidia-Led AI Rally
Powell's "Stock Prices Are Quite High" Remarks Weigh on Sentiment
Focus on August PCE Inflation Data to Be Released on the 26th

All three major indices on the New York Stock Exchange closed lower on September 23 (local time). After hitting record highs the previous day on news of Nvidia's investment in OpenAI, the rally halted amid growing doubts about the sustainability of the artificial intelligence (AI) surge. Investor sentiment was further dampened by Federal Reserve Chair Jerome Powell's comments warning of overvalued equities and his cautious hints regarding monetary policy.

On this day, the Dow Jones Industrial Average, which is focused on blue-chip stocks, closed at 46,292.78, down 88.76 points (0.19%) from the previous trading day. The S&P 500 Index, which tracks large-cap stocks, fell by 36.83 points (0.55%) to 6,656.92, while the tech-heavy Nasdaq Index dropped by 215.503 points (0.95%) to 22,573.473.

The market, which had surged the previous day on AI optimism, reversed course and turned bearish within just one day. Nvidia plans to invest 100 billion dollars in OpenAI to build large-scale AI infrastructure such as data centers and, through this, secure a stake in OpenAI. However, some are expressing concerns that the current AI boom is reminiscent of the dot-com bubble of the early 2000s, raising questions about the sustainability of such gains.

Gil Luria, Head of Technology Research at D.A. Davidson, commented, "While the initial reaction to Nvidia's investment in OpenAI was positive, investors quickly realized that Nvidia might be the only option, the ultimate investor, able to provide OpenAI with the capital it needs right now." He added, "OpenAI has expanded excessively, making investments far beyond what it can handle, and Nvidia may be the only investor capable of supporting this."

Joe Davis, Chief Global Economist at Vanguard, said, "The explosive growth and adoption of AI, along with the Fed's recent rate cut, have been the two main factors driving equity valuations higher." He added, "With valuations somewhat elevated as they are now, the market could become more vulnerable to bad news. For the market to benefit, there must either be an acceleration in growth in the second half of the year or meaningful progress in taming stubborn inflation."

Chair Powell's remarks also weighed on the market. He stated that "stock prices are quite high" and described the outlook for future rate cuts as "uncertain" and "challenging." This somewhat dampened expectations for a rate cut in October.

Additionally, the possibility of a federal government shutdown also weighed on investor sentiment. On September 19, the U.S. Senate rejected a temporary budget bill that had passed the House of Representatives. If a budget is not approved by September 30, a federal government shutdown will be inevitable starting October 1. On this day, President Donald Trump canceled a planned meeting with senior Democratic officials scheduled for later this week, stating, "No meeting can be productive."

The market is also closely watching economic indicators to be released this week. The core focus is the August Personal Consumption Expenditures (PCE) price index, which will be released on September 26. The core PCE price index, the Fed's preferred inflation gauge, is expected to have risen 0.2% month-on-month in August, slowing from July's 0.3%. The Fed, concerned about a slowdown in the labor market, cut its benchmark interest rate by 0.25 percentage points to a range of 4.0-4.25% on September 17. Going forward, inflation and employment data are expected to become key variables influencing the path of interest rates.

By stock, Nvidia fell 2.82%. Oracle dropped 4.27%. Apple and Microsoft declined by 0.64% and 1.01%, respectively. Boeing rose 2% after President Trump announced that Uzbekistan Airways would purchase Boeing aircraft worth more than 8 billion dollars.

U.S. Treasury yields are falling. The yield on the 10-year U.S. Treasury, the global benchmark for bond yields, dropped 3 basis points (1bp=0.01 percentage points) from the previous session to 4.11%. The yield on the 2-year Treasury, which is sensitive to monetary policy, fell 1 basis point to 3.59%.